The private hospital system and private health insurance both play a key role in keeping pressure off the public hospitals system. Access Economics has estimated that, for every two per cent decline that we have seen in private health insurance, that adds the equivalent in demand of a busy public teaching hospital running all year round to the public system. We have seen a decline under Labor of about two per cent a year over that 13-year period. That has added the equivalent in demand of something like 15 public teaching hospitals every year.

The second point to make is that we need to recognise what the Labor Party's vision is for the health system. We need to take it through to its natural progression. What the Labor Party says is that it supports Medicare; well we do too. But it has an ideological obsession with and opposition to private health. The Labor Party represents in its electorates people who use the public hospital system; so do the Liberal and National parties. But only the coalition represents those people with private health.

We have just heard from the member for Fowler, who incidentally, I believe, is in one
of the safest Labor seats in the country. But even the member for Fowler, with the low median income families that she mentioned, has 34,819 voters with private health insurance: that is, 40 per cent of her electorate have private health insurance. Forty per cent of her electorate would be getting a 30 per cent rebate.

Mrs Irwin interjecting—

Dr SOUTHCOTT
—The people in your electorate are on low incomes—you said that.

Mr Bevis interjecting—

Dr SOUTHCOTT
—We don't income test Medicare, do we? What I am saying is that there are 34,819 voters in the seat of Fowler who are not being represented by the member for Fowler. But that is okay because the member for Fowler is in a very safe Labor seat, and I do not think realistically that we are anticipating that we are ever going to win Fowler. But I wonder why it is that all the Labor Party people speaking on this bill have majorities of over 5,000. The only marginal seat member we have heard from so far is the member for the Northern Territory. Later we will hear from the member for Kingston, and then we will hear why these people who have majorities of less than 1,000 and who have more than 20,000 people in their electorates with private health insurance, oppose this measure.

The previous speaker mentioned that we will see a return to a two-tiered system. What rubbish! If you carry through the Labor proposal, what you will see as its natural progression is that we will have a small private sector—because there will always be some people who are privately insured—and most people will be in Medicare. That is the Labor vision. If you want to know what that looks like, go to the UK. That is the National Health Service—10 to 15 per cent of people with private health insurance cover; everyone else is in the public system. Do you know what that means? It means waiting lists and it means all the problems that you have with a large, nationalised health system.

In terms of people dropping out, the major factor has been premium rises. If we look back over the last 15 years, we see that prior
to 1990 several decisions the previous Labor government took have added something like 40 per cent to the cost of premiums now. They included removing things like the bed day subsidy and the reinsurance pool and reducing the Medicare rebate from 85 per cent to 75 per cent for private patients in private hospitals. Their more recent Medicare agreement in 1993 actually encouraged public patients to be treated in public hospitals. So you saw a big shift in people moving from the public system to the private system. Previously, private patients were treated mainly in the private system.

Since 1990 the major reason for premium rises has been the shift from the public to the private system due to the Medicare agreement and also the enhanced capabilities of the private system. In many of the speeches by Labor members we see an outdated idea of what the private hospital system does. Over the last 10 years we have seen almost every form of surgery being offered in private hospitals. Many private hospitals have intensive care units and accident and emergency units. Consequently, there is nothing that is done in the public system that cannot be done in the private system.

The second reason for premium rises has been the process of adverse selection. In the mid-1980s Labor removed the subsidies that existed for private health insurance and we saw huge rises in premiums from 1986 to 1988. When the premiums rose, young, fit and healthy people assessed their own risk and dropped out, which meant that the people who stayed in the funds were more likely to claim. Therefore, there were more payouts and the premiums continue to rise. That is a vicious cycle. The rebate is designed to break that cycle.

When the Labor Party was first elected, over 60 per cent of Australians were covered by private health insurance. When Labor left office 13 years later, the figure was a little over 30 per cent. That has added more people to the public hospital system. Medicare was always designed to work side by side with a strong private health system. That is why, when Medicare was introduced, private health insurance levels were at 50 per cent. This bill
allows for the introduction of a 30 per cent rebate for private health insurance. That rebate is available as a tax rebate, it is available as a cheaper premium or it is available as a direct cash payment from Medicare offices. So low income people get the full benefit of the rebate. It is available to everyone with private health insurance, regardless of their income or their level of coverage.

The policy was announced during the campaign and the intention of this bill is to implement the 30 per cent rebate for private health insurance to begin on 1 January next year. Some people have suggested that premium rises will swallow the value of the rebate. They won't because the rebate is 30 per cent of whatever the premium is.

Dr SOUTHCOTT
—It is interesting to hear that comment from the member for Brisbane because this is Labor Party policy. Labor Party policy is to adopt the government's private health insurance incentive scheme. I welcome the Labor Party's policy. In the last parliament Labor criticised the coalition government's private health insurance scheme and then during the election they announced that it was Labor Party policy. It was successful. It kept 200,000 people in private health insurance who otherwise would have dropped out. But we think that private health insurance needs to be still cheaper to encourage people to get back in.

Unfortunately, premium rises are a fact of life. The premium rises that we have seen since the government came in would have always occurred. It is nonsense to suggest that the premium rises occurred because of the incentive scheme. As most members of the House will know, no premium rise can occur without the agreement of the Prime Minister, Treasurer and health minister and can only be for solvency requirements, not to add to the bottom line of the fund. The rebate is equivalent or better to a tax deduction for private health expenditure for everyone on incomes below $50,000. That covers 81 per cent of people. For 81 per cent of people when we have our new tax rates, from 1 July 2000, the top marginal tax rate is going to be 30 cents in the dollar.

This will restore the level of assistance to private health insurance that existed before the election of the Labor government in 1983. It provides almost six million Australians who are holding private health insurance with relief. Of those six million Australians, there are 700,000 Australians on incomes below $20,000 who hold private health insurance, many of them pensioners, many of them low income, self-funded retirees. There are almost two million Australians on incomes below $30,000 who hold private health insurance. A survey by Morgan Research for MBF found that 67 per cent of the community supported this rebate for private health insurance. So 67 per cent of the community support it—the Labor Party opposes it. Tony Quinn and Associates estimated that you needed something like a 25 to 30 per cent drop in price to bring people back into private health insurance.

The new Medicare agreement requires that every one per cent drop in private health insurance levels requires us to pay an extra $83 million to the state and territory governments. So if we do not do anything to private health insurance levels we will have to pay an extra $500 million in the next few years just to keep the status quo. Let us make it clear. The Labor Party's vision is for a small, private sector which will be for the elite and a large national health scheme, Medicare, in which you will have the problems of waiting lists. But the people who are on high incomes, the people who are influential, can always get past the waiting lists.

The private sector at present provides half the operations in Australia, one-third of the admissions and a quarter of the bed days. The Labor Party has said that the money should be spent on public hospitals. The coalition is spending $32 billion on public hospitals as the Commonwealth government. That is a real increase of 17 per cent over the previous five-year Medicare agreement.

In 1991 the National Health Strategy, chaired by the Labor spokeswoman for health, the member for Jagajaga, published the report Hospital services in Australia. In that report the member for Jagajaga recognised the
problems with the approach that the Labor Party are now advocating. She said that:

. . . increased funding to public hospitals is also likely to lead to a change in the equilibrium between public hospitals, private hospitals and private health insurance, without necessarily achieving the level of impact intended. If increase funding to public hospitals reduced the perceived pressure on public hospitals through smaller waiting lists and shorter waiting times, it is likely that private health insurance levels will drop. This could result in increased demand for public hospitals and reduced revenue from private patients. The result may be a return to the situation which existed prior to the provision of extra resources.

So putting more money into public hospitals is not going to help. It takes us further along the road to the Labor Party's vision for the Australian health system—85 per cent public and a very small elite in the private sector.

The opposition has not recognised that the government has introduced reforms which address the main reason for people's dissatisfaction with private health insurance, that is, rising premiums. Other problems which are often mentioned are the proliferation of bills and the out-of-pocket expenses. The government has introduced reforms to remedy some of these problems. We are going to allow, for the first time, funds to pay loyalty bonuses. We will also allow group discounts for companies and employees. A consumer information service will be developed to help people choose between the different funds and simplified billing will continue to be promoted.

Some people have said that the rebate should be means tested. The people who have dropped out of private health insurance are those in the top three income quintiles, those earning the top 60 per cent of incomes, and they are the ones that we want to get back into private health insurance. Medicare is not means tested. The Labor Party's approach is to say, `We do not mind if a millionaire is bulk-billed. We do not mind if a millionaire is admitted to a public hospital, that is fine. But if people earning a bit above average earnings—families on average weekly earnings—are trying to provide for their own health care, we do not think they should get a rebate for that.' The rebate does not go to the funds, it does not go to the hospitals, it
goes into the pockets of the people who have private health insurance.

The government is also encouraging no gap arrangements. In South Australia the Sportsmed hospital is innovative in this area, developing agreements with most of the care providers at that hospital, with one bill, so that people pay no gap. I believe that, with the majority of orthopaedic surgeons in Adelaide, there is no gap to pay. Under the National Society of Obstetricians and Gynaecologists, there are no out-of-pocket expenses to pay. The Melbourne Private Hospital has pioneered this as well: one bill and no gap.

In my own electorate of Boothby 47,617 voters have private health insurance. That is quite a high level. The Labor Party are the opposing this bill. The Labor Party are opposing giving any assistance to those people who have private health insurance. This puts more pressure on the public hospitals in my electorate.

It is very interesting to look at the number of voters who have private health insurance in many Labor Party electorates. These are the people the Labor Party are not representing. The Leader of the Opposition's electorate of Brand has 45,820 voters with private health insurance. The Deputy leader of the Opposition's electorate of Hotham has 32,424 voters with private health insurance. The member for Jagajaga, who is the Labor Party's spokeswoman for health, has 36,719 voters in her electorate who have private health insurance. Those members probably do not mind that. They are not representing their voters, but they are in very safe Labor seats. But what about the marginal Labor seats?

Where is the member for Bass, who won her seat by 39 votes? She has 24,692 voters with private health insurance. She is going to come in here later today and vote against a 30 per cent rebate for all of those people. Where is the member for Dickson, who won her seat by 88 votes? She has 30,275 voters with private health insurance. The member for Kingston is going to be speaking on this bill later. He won his seat by 382 votes. He has 38,580 voters with private health insurance. If only one person out of 100 change their vote on this issue alone, he is out. The mem
ber for McMillan won his seat by 436 votes. He has 23,909 voters with private health insurance. The member for the Northern Territory won by 518 votes. He has 34,655 voters with private health insurance.

In looking at the speakers' list, I notice that all the Labor Party people hold their seats with majorities of at least 5,000. The member for the Northern Territory and the member for Kingston are the only members holding marginal seats who have said in Hansard that they oppose this rebate. But when the time comes to vote on it, we will see which way they vote. The member for Paterson and the member for the Northern Territory have been through this before. When they go back to their electorates in three years time they need to stand on their voting record in this place. You have all seen the ads. We all know what the Labor Party's voting record was in that period when they opposed a GST and then voted for all the indirect tax rises without any compensation. These members holding marginal seats will have to tell the people who have private health insurance in their electorates—although I am sure our senators will—that they voted against this rebate, that they voted against giving any relief to their constituents.

The Labor Party is quite ideological on the issue of private health. It was not always the case. When Graham Richardson was the minister for health, he decided that Medicare was only sustainable while 40 per cent of people had private cover. He tried to win caucus and cabinet support for a package to support and boost private health insurance membership; it was resisted by the Labor Party for ideological reasons. Speaking on 2GB five days ago, this is what Graham Richardson said about Labor's ideological opposition to the government's 30 per cent rebate:

I think part of the problem is that ideology gets in the road and it does on issues that have anything to do with Medicare. The Labor Party sometimes doesn't act too sensibly.

. . . . . . . . .

On Labor's side . . . they simply don't want to acknowledge that private health care matters. There's an ideological bent here that says Medicare is perfect, which is ridiculous, and therefore can't
be changed, which is also ridiculous, and therefore nothing should be done about private health, which is also ridiculous . . . What they don't want to acknowledge is that as these people are dropping out of private health insurance they are simply queuing up in the public health system to be looked after.

. . . . . . . . .

I wish Labor would stop this silly notion that it doesn't matter if private health care collapses, because I tell you what, we are within five years of a complete collapse of private health care, a complete collapse.

They are the words of the former Labor minister for health. We see a very curious thing in this parliament. Before people are in parliament, such as the member for Jagajaga, they are quite sensible. They indicate that one of the problems with giving more money to public hospitals is that it is just going to keep this cycle going. After they leave parliament, they are like the former minister for health, Graham Richardson. Again, they are quite sound in their reasoning. But when they are sitting in this parliament, they are so ideologically blinkered. They say that Medicare is perfect and that there is nothing wrong with Medicare but, really, they do not support the private system. (Time expired)